Logo for the 2009 NCAA ‘Final Four’ basketball championship, played in Detroit, Michigan.

A front-page story in the Washington Post that ran a few days before the April 2009 “final four” championship NCAA basketball games, focused on the big money that would be flowing into Detroit’s local economy because of the tournament. And indeed, organizers of the event estimated that between $30 million and $40 million would come to the host city. More than 100,000 people were expected to come to Detroit for the event, described by the Post as “the most lavish celebration in college sports.” On April 4, 2009, the first two games were played at Detroit’s Ford Field stadium, and for the first time in tournament history, an NCAA attendance record was set, with some 72,000 fans attending.

The Post story — headlined: “Desperate For a Rebound, Detroit Turns to Basketball” — contrasted the good times for the NCAA with the hard times in Detroit and Michigan, epitomized by the current declining economic fortunes of Detroit’s automakers. NCAA basketball is just one part of what appears to be a rapidly growing “entertainment economy.” But perhaps there is also a broader message to spotlight here: the rise of the “media and entertainment” sectors of America’s economy in recent years versus the declining manufacturing sector.

Manufacturing, obviously, is vital for sustaining any national economy, and Americans would like to see nothing better than a solid manufacturing come-back in the Midwest and elsewhere in the months ahead. Still, in recent decades, the sports, media, and entertainment portions of the American economy have been exploding in value and growth. NCAA basketball is just one part of that — part of what some have called in recent years, “the entertainment economy.” Whether this “new economy” is as desirable as the old industrial variety is another question, certainly, but it is occurring nonetheless.

Sports in general have become a rising and significant part of the U.S. media/entertainment sector. In 1960, for example, there were 42 professional sports franchises, mostly in the northeastern U.S. By 2000,there were more than 110 franchises, and they were spread over more regions of the country. The media, meanwhile, have loomed powerfully over this growth. Since 1980s the annual number of hours of sports programming aired by major broadcast networks and cable systems has more than doubled, rising to 10,000 hours in 2000. The increasing economic value of sports broadcast and cable rights have attracted media and entertainment companies as sports franchise investors, as well as wealthy individuals. And “big event” playoff games and the like, draw lots of attention from would-be host cities.

Ford Field in Detroit played host to more than 72,000 fans for the Final Four NCAA basketball games of early April 2009.

“The Super Bowl, Olympic Games, all star games, and league play-offs for the four major professional sports leagues, and the [NCAA basketball] tournament, qualify as sports mega-events in the United States,” observe analysts Robert A Baade and Victor A Matheson. “Convinced that these sports events produce substantial incremental economic activity, cities compete as vigorously to host them as do the athletes who participate in the events…”

In April 2009, CNN.com reported a story headlined: “Hawaii Looks to Sports for Economic Boost,” explaining how the NFL Pro Bowl game — featuring all-star professional football players in an end-of-season contest — has been an important contributor to the state’s economy for more than 20 years. The game had been played in Honolulu at Aloha Stadium every year since 1980, and it sold out every time. Honolulu Mayor Mufi Hannemann explained that the tens of thousands of people who came to that game every year spent “at least $30 million” across the state. Honolulu lost the game to Florida recently, but Mayor Hannemann is optimistic about getting it back in 2011 and 2012. Hannemann also co-chairs the U.S. Conference of Mayors’ Olympic Task Force, which is hoping to bring the Olympics to Chicago in 2016. Hawaii could benefit from that as well, becoming a stopping off point for visiting fans and participating teams on their way to Chicago. Sports, it seems, is an important part of Hawaii’s economic planning.

NCAA basketball, a part of the larger sports universe, has become its own big business. But this has happened in a relatively short space of time, with broadcast and cable television serving as a powerful handmaidens. NBC telecast the championship NCAA game over its network for the first time in 1969, continuing to do so through the 1970s. There was no cable television then.

By 1979, however, there came Bill Rasmussen, founder of ESPN, an “all sports” cable TV network. Rasmussen had rounded up broadcasting rights for tape-delayed NCAA basketball games as part of what he was then building. There was little TV coverage then of the games leading up to the NCAA finals. It also happened about that time that fan interest in college basketball was ignited by two young rival players named Magic Johnson and Larry Bird who battled each other in the NCAA finals.

CBS' ad revenues.

In March 1979 when Bird and Johnson played in the championship game, more than 35 percent of the TV sets turned on were tuned to that game. That type of TV audience share is not possible in today’s market, but it did show the way to the gold mine in NCAA basketball broadcasting. ESPN, meanwhile, was soon broadcasting 14 of 32 first-round games, and often showed the most competitive games, gaining national appeal. The NCAA tournament was boosted considerably by ESPN’s tournament coverage.

In 1979, the NCAA tournament had a 40-team field. It was expanded twice over the next six years, to 48 teams in 1980 and 64 teams in 1985. The TV rights fees were $5.2 million in 1979. They doubled in 1980. By 1982, when CBS outbid NBC for the tournament, the price went to $48 million. In 1985, they doubled again to $96 million. By 1994 CBS paid $1.73 billion for NCAA games through the year 2002. The current package through the year 2011 cost CBS $6.2 billion. But CBS appears to be getting some of that back in ad revenues, both from conventional broadcast and the internet (see graphic).

The televised play of the Final Four NCAA basketball tournament, of course, is only part of the NCAA tournament’s overall economic effect. And basketball is only one of many NCAA sports with championship events, with various college conferences and leagues participating as well. Advertisers from Nike to Chevrolet have been attaching themselves to NCAA sports, and in some cases, individual players, for some time now. On March 10, 2009, for example, Nike announced it would outfit the players of five NCAA teams for tournament play — Duke, Gonzaga, Memphis, Michigan State, and the University of Oregon. Nike would equip the players head-to-toe with a ‘360’ treatment, providing “base-layer apparel, unique uniforms, and customized footwear”. Pontiac, Coca-Cola, AT&T meanwhile, were among prominent Final Four advertisers.

One of a myriad of NCAA video games available for a number of college sports.

The NCAA itself is a major business, sharing its revenue with the leagues and schools in some sports. One only need visit the NCAA.com website to get an idea of the business side of college sports these days and how college sports have become a powerful force in the national economy. As USA Today has recently reported, individual univer- sities are also striking their own sports deals. The University of Maryland now plays football at the Chevy Chase Bank Field at Byrd Stadium as part of its 25-year, $20 million naming-rights deal with the bank. The money also helped finance new luxury suites and other upgrades at the Maryland football stadium. The University of Kansas basketball team recently dropped former sponsor Nike and went with Adidas in a new apparel contract. An eight-year, $26.67 million deal with the athletic company, among other things, places the Adidas three-stripe logo on UK’s basketball jerseys. The University of Texas is exploring its own TV network to fill a statewide cable channel and various internet outlets to broadcast University of Texas football, basketball, and other sports. In fact, since early 2007, at least 37 schools have guaranteed themselves a combined $1.7 billion in fees by bundling and selling multimedia rights.

The Bigger Picture

College sports, of course, are only a sliver of the great American sports pie, and the U.S., only one part of the larger global sports scene. But adding up only the “sports parts” of the media/ entertainment/advertiser juggernaut that is now found globally — Media & entertainment now contribute well north of $500 billion annually to the global economy, and some analysts expect that an even more powerful sports/entertainment component will emerge in the decades ahead. whether World Cup Soccer, Indian cricket, Olympic events, tournament golf and tennis, NASCAR racing and more — plus the prospect of NFL, NBA and Major League Baseball expansion abroad in the future, and one can get an idea of the shift that is occurring in national and global economies. And sports, of course, are only one part of the bigger media/ entertainment engine. There is Hollywood and Bolly- wood, the music industry, television and radio, Broadway and the West End, the internet, video games, hand-held entertainment, related software/hardware, and much more. These are all economic powers within the media/entertainment equation. They now contri- bute well north of $500 billion annually to the global economy, and some analysts expect that an even more powerful sports/media/entertainment component will emerge in the decades ahead, current economic difficulties notwithstanding. NCAA basketball, and its elevation in recent decades to mega-sport event status, illustrates how modern societies are incorporating media, sports, and entertainment elements as increasingly important economic contributors.

Robert A Baade and Victor A Matheson, “An Economic Slam Dunk or March Madness? Assessing the Economic Impact of the NCAA Basetball Tournament,” in John Fizel and Rodney D. Fort, Eds, Economics of College Sports, Westport, CT: Praeger Publishers, 2004, pp. 111-134.